General FAQ Below you will find some frequently asked questions, but if you need further information please contact us. Post-Closing FAQ Below you will find some frequently asked questions, but if you need further information please contact us. What types of HUD loans are available? Section 232 of the National Housing Act (NHA) is for related provisions, construction, and refinancing of residential care facilities. What types of facilities are eligible? Skilled nursing facilities, licensed intermediate care facilities, assisted living facilities, and board and care are eligible for HUD loans. The residence must provide continuous care for at least 20 patients, and independent living cannot occupy more than 25% of the facility. Will HUD consider non-profit entities for the Section 232 program Yes, for-profit and non-profit entities are eligible for HUD. How does HUD deal with ALF entrance fees? In order to be eligible, no upfront entrance fees can be charged to residents. What does “LEAN” stand for? LEAN is not an acronym, but rather is a methodology used in processing Section 232 loans. It is based on the Toyota model to increase efficiency by reducing waste. Reductions in processing variability and non value added activities are explored using value stream mapping. Full use of the internet and value added software tools for application submission, underwriting and closing, as well as punch lists are resources currently being developed and implemented for the LEAN Section 232 program. Are there statistics on the number of new projects submitted, the number accepted, and rejected? ORCF publishes statistics on the website: https://www.hud.gov/federal_housing_administration/healthcare_facilities/residential_care/statistical_reports Follow the link to Weekly Statistical Report – this shows counts of applications received, commitments issued, rejected and closed by type (223f, a7, new construction). When is HUD permission required? Permission from HUD is required for certain actions outlined below. However, this is not an inclusive list and a full list of requirements can be found in the regulatory agreement. Withdrawing money from restricted escrows, Pledging the rents or income to another party, Changing principals, Borrowing, loaning, or pledging assets or changing collateral, Releasing assets or making distributions, Requesting mortgage relief, Threat to permits and approvals, Remedied items that failed an inspection Where can I find forms for Section 232 transactions? The Office of Residential Care Facilities (ORCF) uses over 100 forms. These forms can be found at https://www.hud.gov/federal_housing_administration/healthcare_facilities/residential_care/final_232_documents How do I communicate with HUD? There are a few circumstances in which you will communicate directly with HUD. However, the primary method of communication with HUD is through your lender. Lenders generally communicate with HUD through the 232 Healthcare Portal, through lenders submit operator financials, asset management transactions and notifications, and product transactions for new loans and refinances. More information on the portal can be found at https://www.hud.gov/federal_housing_administration/healthcare_facilities/residential_care/232_healthcare_portal What is accounts receivable funding? Many owners use AR financing to even out cash flow and provide a way to receive periodic or monthly payments from primarily government sources by pledging those receivables as collateral to an AR financing lender. Medicare and Medicaid reimbursement payments can be delayed, and financing can avoid disruptions in paying vendors and staff promptly. For a fee, the lender pays funds from its own funds and is repaid from the government and other sources. Advanced approval must be obtained prior to AR financing. Do I need to notify HUD of a change of participant (CHOP)? Both HUD and the lender must be notified when there is a change of ownership, operator, or management agent. By answering a few questions, the Form HUD-92266-ORCF will generate a Transaction Determinant Code identifying documents required for submission and will assign an Account Executive to complete the review. How do I report surplus cash, distributions, and residual receipts? These are reported in the required Form HUD-93486-ORCF, that must be included in the Annual Audited Financial Statements for the facility and is used to compute when a project has an excess of funds. What if my property is in trouble? Proactive communication with your lender and HUD is vital. Threats can include, failure to make lease payment, default of master lease, designation as a special focus facility, state inspections that threaten licensure, legal judgements, insufficient fidelity bond coverage, threat to abandon project, notification of termination of insurance, among others. Form HUD-9335-ORCF, operator’s notification to HUD of threats Form HUD-93479-ORCF, monthly report for establishing net income Form HUD-93480-ORCF, schedule of disbursements Form HUD-93481-ORCF, schedule of accounts receivables The lender may have to file form, HUD-93334-ORCF. What is included in the monthly accounting reports? Financial reports are required by the Regulatory Agreement, including: Monthly Report for Establishing Net Income, Form HUD-93479-ORCF Schedule of Disbursements, Form HUD-93480-ORCF Schedule of Accounts Payable, Form HUD-93481-ORCF What is a loan modification? A loan modification is a change to the original note and/or the mortgage. The two types of loan modifications include interest rate reduction and default. A modification permanently changes the terms of the note secured by the mortgage and recasts the principal balance of the mortgage note, and institutes a new amortization schedule. Interest Rate Reduction The existing insured loan is current. The mortgage note interest rate is reduced, and the mortgage payment principal and interest is changed. The term of the mortgage remains the same. For an IRR loan modification, the loan must not be subject to a prepayment lockout, and any prepayment penalty required by the mortgage note must be satisfied. The modification must be assembled, reviewed, and submitted by the lender with a recommendation for approval. Default Loan Modification The existing loan is not current. The principal and interest is reduced, and an override of a prepayment lockdown or prepayment penalty may be approved by HUD. Other options must be exhausted before HUD will approve a term extension. What forms are used for asset management? Regarding physical condition of the property, the forms include: Form HUD-93333-ORCF, Physical Compliance Certification Form HUD-92117-ORCF, Completion of Non-Critical Repairs Form HUD-93333-ORCF, EHS Certification To access HUD’s Section 232 Frequently Asked Questions, click here. HUD’s FAQs are divided into 14 categories which include 60 topics regarding the 232-loan program.